Internal Cash Control Question A. Essay

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The fifth principle of cash disbursement is that of independent internal verification. This occurs at Guard Dog because the reconciliation is conducted by the assistant chief accountant, not the treasury. There are other controls as well that are consistent with the principles of internal control of cash. The invoices are stamped "PAID" when the check has been issued, for example. Also, in each key department there are two individuals, which allows each individual to take vacations. The checks are compared to the invoices before they are issued. By doing all of these things, Guard Dog is following the principles of internal control of cash disbursements well.

4-2A. a) There are several weaknesses in the internal control. The head usher counts the money unsupervised; financial management and audit is conducted by the same group; regular audits are not conducted; only one employee keeps records; the financial secretary conducts reconciliation and audits; the church lacks fidelity insurance; the financial secretary also counts the cash unattended; checks are made payable to "cash"; there are no controls on minor disbursements and little record keeping of such transactions.

A b) I would recommend the following improvements. For the ushers, they should remain with the head usher while the count is made. Moreover, because ushers handle cash they should not be volunteers who are constantly rotated. They should be trusted individuals.

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Checks should be made out to the church. Ushers should work in teams of two unrelated individuals. The head usher should conduct the count with the ushers present. The financial secretary should be subject to fidelity insurance. This person should be spelled off for vacation every year. Additionally, this person not count the collections if they are to handle disbursements. The financial secretary should need approval for the petty disbursements they make. The financial secretary should not perform reconciliations. The finance committee should undertake more oversight into petty disbursements made by the financial secretary and demand records be kept of these. The finance committee should hire an auditor to conduct the reconciliation.

A c) the policies I would change would be to have checks made out to the church, not to cash. I would segregate the duties better - splitting disbursements from reconciliation, for example. I would also reconsider the policy of rotating volunteer ushers in favor of more stable workers. I would force the financial secretary to take an annual vacation. The policy of not having insurance I would also change. I would institute regular audits by a party not otherwise involved in internal cash controls. Lastly, I would involve the financial committee in both collections and recordkeeping, so that they are involved in all aspects of the church's finances......

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